Coinbase (COIN) to Report Strong Earnings, ETF Benefits May Surprise Market

Analysts predict a strong quarter for the crypto exchange as trading volume had picked up in the final days of the year. FactSet consensus estimates Coinbase's revenue increased to $826.1 million from $674.1 million in the previous quarter. Trading volume and earnings per share (EPS) are also expected to have picked up.

COIN last reported earnings on 02 Nov 2023 after the market close (AMC). COIN shares gained +1.4% the day following the earnings announcement to close at 85.80. Following its earnings release, 104 days ago, COIN stock has drifted +86.9% higher.

From the time it announced earnings, COIN traded in a range between 84.09 and 187.39. The last price (160.38) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 11.4%. Based on past price effect, we could be looking at a positive price effect of more than 10% after earnings.

The options market overestimated COIN stocks earnings move 82% of the time in the last 11 quarters. The predicted move after earnings announcement was ±12.6% on average vs an average of the actual earnings moves of 7.2% (in absolute terms).

Option valuation appears to be overvalued for Coinbase, and this suggest some price volatility, but we could see an upside move for Coinbase with a strong earnings.

Based on current implied volatility, the options market is pricing in a +-$16.72 stock price move for just this week. Compare that to the expected move through the March options cycle, which sits at +-$31.27, and we can see that over half of the expected move for the next few months is priced into this earnings announcement.

Coinbase is expected to report stronger earnings and revenue due to increased trading volume as the broader market rallied during the quarter.

The higher trading volume would not likely be a surprise as the digital currency market saw a recovery in prices during the fourth quarter, buoyed by spot bitcoin (BTC) exchange-traded funds (ETFs) getting approved to trade in the U.S.

As seen in the Coinbase trading volume over the last 2 weeks, we can see that a new highs is created, this could be coming from spot bitcoin (BTC) ETFs, as well as the Bitcoin price rally.

Appreciate if you could share your thoughts in the comment section whether you think Coinbase would continue its rally after earnings amidst the Bitcoin rally?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.